The olive oil shortage is coming, says Walter Zanre, boss of Filippo Berio UK, the nation’s best-selling olive oil brand, and it will be much worse than anyone realizes.
“Look at these numbers,” he says, spreading out sheets of data on olive harvests around the world. “2017 will be very bad for olive oil.”
Two of the world’s largest olive oil producers have endured consecutive years of bad harvests: in Spain, an unusually hot and dry summer just led to the worst harvest in nearly 20 years. While Italian producers have suffered an outbreak of the Xylella fastidiosa bacteria among olive groves, with more than a million trees infected.
“This year Tuscany will produce just 50% of its usual volume,” says Zanre, noting that there has already been a 40% rise in wholesale olive oil prices. “If costs keep going up and customers refuse to pay more, what do we do?” asks Zanre. “Do we make the bottles smaller? Or do you try and cut corners? That’s how you end up with a horse meat scandal.”
Between the bad harvests and ongoing currency volatility around the world, it’s a bad time to be in olive oil, he admits. “We’ve been forced to go from people who make and bottle olive oil to currency speculators,” he says.
Filippo Berio, the brand, has been selling olive oil for 150 years. It is owned by Salov Group, a corporation that generates more than €340 million (C$473.5 million) in revenue each year — Filippo Berio in the UK turns over a fraction of this sum, at £40 million (C$65.6 million).
Salov was bought for an undisclosed sum in 2014 by Chinese conglomerate Bright Food, which also owns Weetabix. “Selling the business saved it,” Zanre says of the deal. Salov president Alberto Fontana, who is still a shareholder, believed that his grandchildren would not be the best stewards of the business for future generations, Zanre claims.
Zanre joined Filippo Berio UK in 2000 from Italian food importer Mediterranean Growers. But despite his Roman surname, and his dark blue Cerutti suit, Zanre is actually a Londoner. He was born in the Royal Free hospital in Islington to Italian parents. “My father came here in 1959,” he says. “I once called him brave for leaving Italy and coming here when he couldn’t speak a word of English, and he said, ‘Brave? We couldn’t afford shoes in Italy.'”
Zanre’s roots mean he has taken the country’s decision to leave the European Union very hard. “The Brexit camp was talking a lot about cheap immigrant labour, but that’s what my parents were when they came here,” he says. “Brexit is also bad for business, as food inflation will rise. We will soon hit recession in the UK.”
All of these pressures have forced Zanre to look beyond trading olive oil alone. He has convinced the super conservative parent company to let him experiment outside the category, launching a balsamic vinegar and a pesto range that he claims have seen some success, as well as Filippo Berio branded olives. But his big punt will come this April, when he launches a new product into the snacking aisle. The joint venture with baking giant Chaucer Foods will see Filippo Berio put its name to a new range of baked snacks.
Chaucer Foods, which specialises in making soup croutons for the likes of M&S, will apply their know-how to these bruschetta bites and focaccia fingers, which will sit alongside crisps and chocolate bars. Flavours are still under wraps, Zanre says, but one of his favourites is “tumbled in olive oil, rosemary and sea salt”.
There is method to this apparent madness. “Do you know how often the British consumer typically buys olive oil?” he asks. “The answer is 2.1 times a year. They buy a packet of crisps every day. I don’t want to be Walkers but I want to move into the mainstream. The snacking market is worth £1 billion.”
The deal with Chaucer is likely to be the first of many licensing deals, he reveals. There’s another reason for Zanre’s obsession with diversification. The upcoming cost rises in olive oil do not bode well for any producer. “The supermarkets keep trying to drive down prices,” he admits. “It’s already so competitive. And if you go into a supermarket, which bottles get the eye-line positioning? It’s always their own-label olive oil.
2017 will be very bad for olive oil
Recent Mintel data also shows a growing preference for speciality oils, such as coconut and avocado, which could soon start to dent olive oil sales if prices rise too high. According to David Turner, food and drink analyst at Mintel: “Many consumers are already concerned over olive oil pricing, leading them to switch to less expensive alternative oils when prices rise.” In 2014, Mintel’s data showed that although olive oil retail value sales grew by 6pc this was largely the effect of price increases as a result of product shortages. Volume sales fell by 3% during that year.
To boost revenues, Filippo Berio has teamed up with several other Italian brands to form a consortium, which aims to raise the profile of authentic Italian cuisine. The alliance has been going for 10 years but has only recently targeted the U.K., under the name Ciao Gusto. It has its own shop window on Ocado, the online grocer, with a range of 260 Italian products. All the brands involved are non-competing, and range from other household names such as coffee label Lavazza, to small artisan producers like dairy-free ice cream brand Valsoia.
Filippo Berio, which claims to own 23% market share in the U.K. (Mintel places this figure at 19%), is undoubtedly the biggest player in the Ciao Gusto pack, but there remains strength in numbers, Zanre argues. “We are strong in the U.K. and the U.S., so other companies may look at us enviously but we are not big in Germany, for example, compared to others in the consortium. We want to join forces to penetrate the Far East. Collectively, we have strength.”
And while U.K. consumers may instinctively reach for Filippo Berio’s green and gold bottles if they like the product, the brand name remains a mystery to many shoppers. “We have done some focus groups, and people will say that they have bought our oil but they can’t remember the name,” Zanre admits. Back in 2007, the company attempted to imprint the name Filippo Berio on the public consciousness through an ad, which substituted the words “Filippo Berio into Gioacchino Rossini’s famous Largo al Factotum (Figaro’s Aria from The Barber of Seville). This was a turning point for brand awareness, according to Zanre. “It took eight years to get the cash together to put a Filippo Berio ad on the television,” he says. “That was our ‘Just one Cornetto’ moment. It’s been off the air for three years and people still sing it to me.”